5 Dwelling and Homeowners Insurance

5 Dwelling and Homeowners Insurance

INTRODUCTION

As an insurance producer, it's important to make suitable insurance recommendations to potential applicants and existing customers. To do this, producers should be knowledgeable about the insurance products being offered and, in all circumstances, put the customer's interest first.

For instance, when Joe Customer calls Jane Producer to compare his current Homeowners and Personal Automobile insurance, Jane should focus first on meeting Joe's needs rather than quoting the cheapest premiums. His current agent may not have recommended the best coverage for Joe's situation. Using a brief needs assessment, Jane should be able to determine Joe's actual needs in contrast to what Joe thinks he needs. Jane can afterwards match the right policy type and coverages to Joe's needs. At that point, Jane can then discuss premium amounts.

LESSON GOAL

The goal of this lesson is to present the dwelling and homeowners programs in an effort to compare and contrast coverages available under each.

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I. DWELLING PROGRAM

A. SIMILAR BUT DIFFERENT

While there are some parallels in coverage, there are also a number of differences between the dwelling and homeowners programs. The key difference is that homeowners insurance combines property coverage with liability coverage, while dwelling policies only provide property coverage--unless endorsed to include theft and personal liability coverage that are similar to a standard homeowners policy. Even so, the coverage provided under a standard dwelling policy will not normally be as comprehensive as a homeowners policy. On the other hand, dwelling policies may provide more flexible coverage options in some cases. But most importantly, both programs offer more than one policy form. Understanding the perils insured, optional coverages, endorsements and exclusions under each form will be instrumental in preparation for the state insurance exam.

B. ELIGIBILITY

Dwelling policies are often purchased for residential properties that are not eligible for coverage under the HO program. Rental property and vacation homes are two common examples. The owner of a rental house or vacation home will not normally live in the home for the majority of the year. Conversely, the homeowners program requires the owner to also occupy the insured residence. To purchase a dwelling policy, certain eligibility requirements must be met. A dwelling policy may be issued to provide insurance under Coverage A on: 1. A dwelling used solely for residential purposes with two exceptions:

? certain incidental occupancies are permitted and ? a maximum 5 roomers or boarders are permitted 2. A dwelling building containing four or fewer apartments 3. A townhouse or row house structure 4. A dwelling building under construction 5. A dwelling building occupied by the owner that has values lower than the insurance company minimums required for homeowners insurance 6. A permanently installed mobile home (usually the DP-1 only)

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SPECIAL NOTE:

Dwellings used for dwelling purposes that are located on a farm, ranch, orchard or grove may be insured under the DP1 form under the following conditions:

1. Liability coverage will not be provided for farming or ranching operations

2. Farming or ranching activities conducted on the residence premises are incidental to the use of the premises for residential living purposes

C. FORMS AND COVERAGES

1. Declarations

A Dwelling policy will consist of a declarations page (dec page), a coverage form (DP-1, DP-2, or DP-3), and one or more mandatory or optional endorsements.

The Dec page identifies the named insured(s), the insured location, the policy period, the types of coverage, endorsements, deductible, and premium.

2. Coverages

The coverage parts provided for in the declarations are:

Coverage

DP-1

Coverage A- Dwelling Coverage B- Other Structures Coverage C- Personal Property Coverage D- Fair Rental Value Coverage E- Additional Living Expenses

X X X X

Added by Endorsement

DP-2

X X X X X

DP-3

X X X X X

Coverage A -- Dwelling

Coverage A insures the residence premises and structures that are attached to the dwelling. Coverage is also provided for:

1. Building materials located on or next to the residence premises used to renovate or repair the dwelling;

2. Building and outdoor equipment used to service the premises.

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5- Dwelling and Homeowners Insurance

Coverage B -- Other Structures

Coverage B insures buildings on the residence premises that are separated from the dwelling by a clear space or connected only by a fence, utility line or similar connection (such as a barn, patio, detached garage, work shed, or guest house). The structure may not be used for commercial, manufacturing, or farming purposes.

The standard amount of insurance for Coverage B is 10% of the Coverage A amount. The Coverage B amount of insurance does not reduce the Coverage A limit. It is provided in addition to the Coverage A amount. For example, if the dwelling is insured for $100,000 under Coverage A, the limit for Coverage B would be 10% of $100,000 or $10,000. If a claim was paid for a covered loss under Coverage B for $5,000, the Coverage A limit would not be reduced to $95,000.

Coverage B Exclusions No coverage under this part will be provided for:

? The land on which the other structures are located;

? Other structures rented or made available for rent to any non-tenant of the dwelling-- unless the non-tenant uses the structure as a private garage;

? Other structures used to operate a business or store business property, unless the business property is owned by an insured or tenant of the dwelling. However, if the business property owned by an insured or tenant is gaseous or liquid fuel that is not stored in a permanently installed fuel tank of a vehicle, or craft parked or stored in the structure, it will not be covered. In other words, if the gas or liquid fuel is stored in a permanently installed fuel tank of a vehicle, or craft parked or stored in the structure, it will be covered.

Coverage C -- Personal Property

Coverage C is sometimes referred to as "contents coverage" since coverage is provided for an insured's personal property that is typical to a residential dwelling--furniture, electronic equipment, bikes, clothing, appliances, etc.

With a dwelling policy, Coverage C limits are not set as a percentage of the Coverage A limit as with the Homeowners insurance. The insured chooses the appropriate personal property limit based on his or her needs. This limit does not reduce any other coverage part limit. It is considered additional insurance.

Up to 10% of the limit of liability for Coverage C may be used to cover the insured's personal property while anywhere in the world. For example, if the insured has a $50,000 Coverage C limit for personal property located at the residence premises, the policy would provide a limit of up to $5,000 for the insured's personal property located outside of the residence premises.

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? 2014 0Chance2Fail.co m. This PDF is made available for personal use only during your online course access time limits, subject to the Terms of Use Agreement. Any other use requires prior written consent from the copyright owner. Unauthorized use, reproduction and/or distribution are strictly prohibited and violate applicable laws. All rights reserved.

5- Dwelling and Homeowners Insurance

In addition, the insured can request coverage for personal property owned by another person if the property is located on the part of the residence premises occupied by an insured.

Coverage C Exclusions As with most policies, not all types of personal property can be covered. The following types of personal property are excluded under Coverage C: ? Articles insured elsewhere ? Accounts, bank notes and other notes, bills, bullion, coins, currency, money, and securities ? Deeds, evidence of debt, letters of credit, manuscripts, passports, personal records,

tickets, stamps, scrip, stored value cards, and smart cards ? Gold other than goldware, medals, platinum (other than platinumware), and silver other

than silverwar; ? Credit cards and fund transfer cards; ? Animals, birds, and fish; ? Aircraft; ? Motor vehicles, other than motorized equipment used to maintain the premises; ? Boats, other than rowboats and canoes; ? Hovercraft and parts (hovercraft refers to self-propelled motorized ground effect

vehicles, such as air cushion vehicles and flarecraft); ? Water or steam (under the earlier forms, it could be argued that water became the

insured's personal property after it passed through the insured's water meter; this exclusion makes the intent of the policy clear); ? Grave markers, including mausoleums; ? Electronic fund transfer cards or access devices used to deposit, withdraw, or transfer funds; ? Scrip, stored value cards, and smart cards; and ? Data stored in computers and related equipment.

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? 2014 0Chance2Fail.co m. This PDF is made available for personal use only during your online course access time limits, subject to the Terms of Use Agreement. Any other use requires prior written consent from the copyright owner. Unauthorized use, reproduction and/or distribution are strictly prohibited and violate applicable laws. All rights reserved.

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